Gold and Silver Outlook for July 29 - August 2

During last week, gold and silver traded up. Nonetheless, most of their gain came on Monday. During the rest of the week, both metals had an unclear trend. Their recent rally coincided with the ongoing depreciation of the US dollar against currencies including Euro and Aussie dollar. The weakness in the U.S equity market may have also contributed to the latest rally of precious metals prices. During the previous week, several U.S reports came out and didn’t show a clear direction as to the progress of the American economy, which may have contributed to precious metals’ unclear trend during most of the week. These reports included: existing home sales slipped by 1.2% in June; jobless claims rose by 7k to reach 343k. Conversely, core durable goods spiked by 4.2% during last month; new home sales jumped by 8.3% in June. Will gold and silver continue to trade up this week?

Herein is a short overview that breaks down the main publications, events and decisions that will enfold next week between July 29th and August 2nd and could affect gold and silver.

The five main news items that will unfold during this week are: non-farm payroll report, first estimate of GDP for the second quarter, FOMC meeting and consumer sentiment. The current expectations are that the FOMC won’t change its policy this time. The September meeting, however, is the one that some analysts speculate could be the one, in which the Fed will announce of tapering QE3. Until then, the speculations around the Fed’s next move will remain high and will keep gold and silver prices moving in an unclear trend. If in the upcoming meeting Bernanke will reiterate his words from the last press conference following the FOMC meeting, this could drag down gold and silver. If we will get Bernanke from his latest testimony, in which he suggested the U.S economy still needs the Fed’s asset purchase program; this tone is likely to pull up precious metals. Moreover, if the payroll report will show growth in jobs of well over 150k as it did in recent months, this may pressure down gold and silver rates as they tend to be negatively correlated with precious metals daily changes.

Finally, the recent recovery of gold price didn’t help pull up gold holdings of SPDR gold trust ETF that continues to dwindle: Since the beginning of July, the ETF’s gold holdings fell by 4.35% and by 31.35% during 2013 (up-to-date). Current gold holdings are at 927.355 tons. If the ETF’s gold holdings continue to decline, this could indicate the demand for gold as an investment further falls.

My guess is that gold and silver’s recent rally won’t last long and they will resume their downward trend.